Needed to remove cylinder to get clear access to aquadrive after it failed (another story...) and lost most of the coolant from the motor when disconnecting plumbing. Cylinder has been put back into place and all plumbing reconnected and coolant topped up.

Couple of questions:

1) Does the cooling circuit need to be bleed of any air? If so how would you do it?

2) How long would it take to notice a temp change in the water comming out of the hotwater tap? (tank holds about 20L)

I ran the motor for about 20mins and could not detect any change of temp in water - I get conflicting advice, some say that it should take 10 min and other say an hour or more.

I'm a little concerned that there may be an air lock in the system and the water from the motor is not getting to the cylinder to heat it.

I am not any sort of expert, nor do I have any experience with the type of system you describe... but just as a quick test, when you have run your motor for 10 minutes or so, check the water temperature where your cooling water exhausts out of the transom... if that is noticeably "warm" (and it sould be), then I would have thought that you might expect that the water in the hot water cylinder would also be... and if it isn't then you have a problem.

2) How long would it take to notice a temp change in the water comming out of the hotwater tap? (tank holds about 20L)

It depends how much waste heat your engine is generating, which depends on the load.

On my boat, if you're sitting at the dock with the engine idling, the answer is "about forever". On the other hand, I can have dangerously hot water after motoring into an anchorage and dropping the anchor -- an hour maybe? I've never really tried to determine the minimum time.

(I say dangerously hot because the water in the tank eventually rises to the temperature of the engine coolant, which is much hotter than you would want to get on your skin. We are always careful not to turn the handle all the way to "hot" when using engine-heated water.)

The important point is that the engine isn't making much heat unless it is working hard. If it doesn't make much heat, there isn't much heat to dump into your water heater. There also isn't much need for coolant flow. My engine can idle for a long time with unreasonably low coolant levels, but not overheat. The alarm comes up 5 or 10 minutes after I leave the dock, though.

If you go out an motor around for a while, I expect one of two things will happen: either your engine will overheat (because of the air lock resisting coolant flow) or you will get hot water from your tap. Instead of motoring, some people put the engine in gear and raise the throttle while still tied to the dock. This makes the engine work harder, but some marinas don't want you doing it because of the strain it puts on cleats/pilings/etc.